SHREE DHANWANTRI HERBALS,SOLAN vs. DCIT, CIRCLE PARWANOO, PARWANOO

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ITA 21/CHANDI/2026Status: DisposedITAT Chandigarh30 July 20264 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the quantum addition, which formed the basis for the penalty, was subsequently deleted by the High Court, the penalty cannot survive independently. Therefore, the penalty is unsustainable in law.

What were the facts?

The Assessing Officer levied a penalty under section 271(1)(c) based on the disallowance of deduction claimed under section 80-IC. The CIT(A) confirmed this penalty. The assessee appealed this confirmation.

What were the issues?

Whether a penalty under Section 271(1)(c) can be sustained when the underlying addition forming its basis has been deleted by a higher court.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 80-IC

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH

Before: SHRI LALIET KUMAR & SHRI MANOJ KUMAR AGGARWAL

For Appellant: Shri Manoj Kumar, CA &, Shri Kartikeya Gupta, Advocate
For Respondent: Dr. Ranjit Kaur, Addl. CIT, Sr.DR
Hearing: 29.07.2026Pronounced: 30.07.2026

आयकर अपील�य अ�धकरण,च�डीगढ़ �यायपीठ, च�डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘B’ CHANDIGARH BEFORE SHRI LALIET KUMAR, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 21/CHD/2026 �नधा�रण वष� / Assessment Year: 2012-13 Shree Dhanwantri Herbals, The DCIT, Unit-II, Village-Kishanpura, Vs Circle, PO-Gurumajra, Baddi, Parwanoo. Solan (HP). �थायी लेखा सं./PAN NO: AAZFS3118E अपीलाथ�/Appellant ��यथ�/Respondent Assessee by : Shri Manoj Kumar, CA & Shri Kartikeya Gupta, Advocate Revenue by : Dr. Ranjit Kaur, Addl. CIT, Sr.DR Date of Hearing : 29.07.2026 Date of Pronouncement : 30.07.2026 HYBRID HEARING O R D E R PER LALIET KUMAR, JM

The present appeal has been preferred by the assessee against the order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, whereby the penalty of ₹15,00,000/- imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961 was confirmed. The penalty had been levied on account of the disallowance of deduction claimed by the assessee under section 80-IC in respect of substantial expansion, wherein the Assessing Officer held that the assessee was entitled only to deduction at the rate of 25% instead of 100%. The learned CIT(A), while affirming the findings of the

ITA No.21/CHD/2026 A.Y.2012-13 2 Assessing Officer, upheld the levy of penalty on the ground that the assessee had furnished inaccurate particulars of income. Aggrieved by the said order, the assessee is in appeal before the Tribunal.

2.

The learned Authorised Representative submitted that the very foundation for levy of penalty no longer survives. It was contended that the quantum addition made by restricting the deduction claimed under section 80-IC has since been deleted by the Hon'ble High Court of Himachal Pradesh, which has decided the quantum issue in favour of the assessee. Consequently, once the addition forming the basis of the penalty has ceased to exist, the penalty imposed under section 271(1)(c) cannot survive independently. It was, therefore, prayed that the penalty confirmed by the learned CIT(A) be deleted.

3.

Per contra, the learned Departmental Representative placed on record a report obtained from the Assessing Officer, wherein it has been acknowledged that the quantum addition on the basis of which the impugned penalty had been levied has been deleted by the Hon'ble Himachal Pradesh High Court. In view of the factual position emerging from the report, the learned DR fairly left the matter to the discretion of the Bench. 4. We have heard the rival submissions and carefully perused the material available on record. The undisputed factual position emerging from the record is that the impugned penalty under section 271(1)(c) was levied solely on the basis of the disallowance of deduction claimed

ITA No.21/CHD/2026 A.Y.2012-13 3 by the assessee under section 80-IC. It is also not in dispute that the very quantum addition, which constituted the foundation for the levy of penalty, has subsequently been deleted by the Hon'ble High Court of Himachal Pradesh. This factual position has also been confirmed by the Assessing Officer in the report placed before us by the learned Departmental Representative.

5.

It is a settled proposition of law that where the quantum addition forming the very basis of the penalty has been deleted, the penalty imposed with reference to such addition cannot survive. Once the foundation itself is removed, the superstructure built thereon necessarily collapses. Since no addition now survives against the assessee, there remains no justification for sustaining the penalty under section 271(1)(c) of the Act.

6.

Accordingly, we hold that the penalty imposed by the Assessing Officer and sustained by the learned CIT(A) is unsustainable in law. The same is directed to be deleted.

7.

In the result, the appeal filed by the assessee is allowed.

Order pronounced on 30th July,2026.

Sd/- Sd/-

(MANOJ KUMAR AGGARWAL) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER “Poonam”

ITA No.21/CHD/2026 A.Y.2012-13 4 आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 1. ��यथ�/ The Respondent 2. आयकर आयु�/ CIT 3. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 4. गाड� फाईल/ Guard File 5.

सहायक पंजीकार/ Assistant Registrar

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